The state Legislature grabbed more than $17 million from the state’s Renewable Energy Fund to balance the budget and bail out the financially troubled Tri-County Community Action program in the North Country – a move that has renewable-energy advocates and ratepayer groups crying foul.

The budget approved by the House and Senate last week and signed by the governor on Friday takes $16.1 million for the general fund and an additional $1.25 million for the community action program. That leaves the state’s renewable-energy grant and rebate program with a budget of $7.8 million for the fiscal year that begins on Monday.

That’s a significant increase over last year’s budget of $5.6 million for renewable-energy programs, but that’s not the point, according to people such as Kate Epsen, executive director at the N.H. Sustainable Energy Association, and Marc Brown, executive director at New England Ratepayers Association.

While they may take opposing views on the value of renewable-energy programs, they both agree that the state is engaged in a massive bait and switch: Collecting millions of dollars from energy suppliers to finance projects such as wood-pellet boilers in schools, and using the money, instead, as though it was general tax revenue.

The state’s renewable-fuels portfolio law requires all electric service providers to purchase a certain percentage of their electricity from renewable-energy sources, including wood-fired or small hydroelectric plants. If a service provider can’t get enough renewable energy to meet the requirements, it makes “alternative compliance payments” that go into the Renewable Energy Fund. The costs are passed along to ratepayers.

The payments skyrocketed in the past year because of the limited supply of energy from existing biomass and methane gas power plants, according to the fund’s most recent annual report. The owners of power plants that were generating electricity from renewable sources chose, for the most part, to sell their power at higher prices to service providers in other states. As a result, a fund that had collected only $2.6 million in 2011 pulled in $19 million in 2012.

Confronting tough choices

When the surplus was revealed in the fund’s annual report last October, it was obviously low-hanging fruit for lawmakers trying to balance the state budget with limited options for new revenue. Asked about the likelihood of raiding the fund in May, Gov. Maggie Hassan said the state had to confront a variety of tough choices, especially if it was to avoid a Senate-proposed $50 million cut in state personnel costs.

“We were opposed to the fund being raided in any amount,” Epsen said Thursday as the budget outcome became obvious. “We think it’s bad policy to steal from these dedicated funds, and it’s a lost opportunity for economic development.”

Grants from the Renewable Energy Fund usually cover only 10 to 50 percent of approved projects, but that money attracts matching investments, both public and private, that would not be generated otherwise, Epsen said.

Epsen suggested the budget for the renewable-energy grants administered through the Public Utilities Commission has been kept artificially low by the Legislature in anticipation of using most of the money for other purposes, which she said could be challenged in court.

“We’re still looking at a legal analysis of that,” he said, “but I think the possibility of a case is there.”

The statute creating the renewable-energy program clearly states that the funds collected cannot be used for any other purpose, but the Legislature works around those restrictions by including this phrase when redirecting money from a dedicated fund: “notwithstanding any provision of the law to the contrary.”

“From the ratepayer’s perspective, it’s a clear bait and switch,” said Brown. “We’re being told we are paying higher rates for the environmental benefits of renewable energy, but that’s not where most of the money is going. It’s just poor governing and disingenuous to the public. Why should ratepayers be asked to accept higher rates for a promise that’s not being delivered?”

Lack of transparency

Ratepayers don’t see a separate line for renewable-energy compliance on their electric bills. It’s blended into the energy supply rate.

Epsen said lawmakers have made a practice of raiding dedicated funds to avoid accountability for tax increases.

“It’s a real problem,” she said. “New Hampshire has to think about how it’s going to raise its revenue, and whether it’s going to be transparent about that.”

The Renewable Energy Rebate program provides partial funding or rebates for residential and commercial installations, including wood-pellet boilers and solar panel arrays for electricity or hot water.

According to Jack Ruderman, director of the Sustainable Energy Division in the PUC, demand for the programs is high. “In one program last year we allocated $1 million and received proposals worth $10 million, so we turned a lot of projects away,” he said. “We are seeing success with residential wood-pellet heating, and there is really serious demand in the commercial sector. We’re getting a lot of inquiries from schools in particular for alterative heating sources.”

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